There are two key ingredients when it comes to selling a business: professionalism and confidentiality. If either of these two ingredients are lacking, then you’ll most likely run into problems. Sadly, many sellers see their deals fall apart due to a breach of confidentiality. You certainly don’t want to be among their ranks.
The simple fact is that a breach in confidentiality can negatively impact everyone from suppliers and vendors to creditors. For example, vendors could change their terms and this, in turn, could have a major, negative impact on cash flow. There can be a chain reaction of events that spirals out of control.
The potential negative outcomes of a breach in confidentiality are quite numerous, for example, employees and customers alike could begin to worry about the future of the business. Employees could begin to worry about the safety of their jobs and begin looking for a new position. Dangerously, this situation could lead to changes in management and the loss of key employees. Likewise, customers, fearing instability with the business, could also decide to take the business elsewhere, leading to revenue problems.
Yet another complicating factor comes in the form of the competition. If the competition hears that your business is up for sale, they could sense blood in the water and look to steal your customers.
Ultimately, a breach could give potential buyers cold feet. At this point, it should be very clear that protecting confidentiality is a must. One of the single best ways to ensure that confidentiality is maintained is to opt for an experienced and proven business broker. Business brokers understand the simply tremendous value of keeping things under wraps.
It may be tempting to try and sell your business on your own, but it is vital to understand that doing so can damage your businesses’ reputation. A good business broker knows how to shield your business from breaches of confidentiality. By working with a business broker, not only are confidentiality agreements signed and taken seriously, but also you’ll know that prospective buyers are vetted and fully pre-qualified. According to an article on Inc.com, broker feedback has revealed 9 out of 10 interested parties who respond to “business for sale” ads are not qualified to make the purchase. Why would you want to risk giving away key details to these parties?
In short, you’ll have a much better idea of who you are dealing with and how serious they are about buying your business. At the end of the day, there is no replacement for maintaining confidentiality.Read More
Value is one thing. Price is a different thing.
We appraise every business we list so that the owner knows the “most probable selling price”.
Business owners will settle at more, or less, than the appraised value. This may result from the different motivations and negotiating skills of the parties. As an example a seller compelled to sell urgently through illness may not maximize the price received due to the urgent need to close a deal.
Conversely, a buyer may pay top price because the business offers special benefits for that particular buyer, e.g. location.
Apart from motivations and negotiating skills the deal structure can greatly influence price.
Sellers and buyers need to remember you can’t separate the price from the terms… – an old saying is “you can name the price, if I can name the terms”. “I’ll give you $10M for your business… and pay you $20/mo.” Price could be right in the ballpark but the terms will not work.
Earn-outs have become increasingly common in some sectors. With these, part of the purchase price is withheld for a period of time subject to certain sales or profit targets being met.
Employment, or on-going consultancy can also affect price. A business owner may wish to “cash out” but be happy to continue working for the new owner on a part-time or full-time basis, or provide consultancy services. These arrangements can provide security for the new owner (e.g. retaining relationships) plus cashflow and employment for the exiting party.
A well-thought out deal structure can benefit everyone – maximizing price for the seller, minimizing risk for the purchaser… deals get done when they work well for both sides.Read More
No one works forever. Regardless of how much you love your business, sooner or later you will have to step away. Owning a business can be very demanding. This fact can be doubly true for owner-operators of businesses. The simple fact is that you’ll have to embrace retirement at some point.
Most business owners have never sold a business before and may not know what to expect. The good news is that prospective buyers usually like the idea of buying an established business directly from a business owner. It is key, however, to do everything possible to make selling your business, as well as the transition period, as easy for a buyer as possible.
Prepping your business for sale has many diverse parts that need to be taken into consideration. Prospective buyers want to feel as though they will have a seamless transition, so it’s in your best interest to evaluate what steps you need to take to make the transition smooth.
You are the world’s greatest expert on your business. As a result, you are perfectly positioned to evaluate your business so as to ensure that it is both appealing to a prospective buyer and ready to sell. Let’s take a look at the steps you can take to ensure a smooth transition.
The Top 4 Transition Tips
1. Automate as many processes as possible.
In this way, prospective buyers are less likely to be intimidated by the level of work involved in owning a small business. The odds are good that many of your prospective buyers have never owned a business before. One of the best ways to not scare prospects away is to make owning and operating your business as streamlined as possible.
2. Work with your employees, key customers and vendors to ensure a smooth transition.
Anything that can cause a potential disruption may scare off prospective buyers. Put yourself in the shoes of prospective buyers and think about what may cause you concern if you were evaluating a business. Once you locate those areas of potential concern, do what you can start to remedy them well before placing your business on the market.
3. Pick out your “second-in-command” before you sell your business.
Having a competent and proven “right hand man or woman” that can step in and essentially operate your business is a very attractive asset to have in place when it comes time to sell your business.
4. Consider working with a business broker.
Brokers are expert in the art and craft of buying and selling businesses. They will be able to help you evaluate your business and address areas that need improvement so as to ensure a smooth transition.
Taking these steps will not just make your business easier to sell, but it will also shorten the amount of time it takes to sell. The last thing you want when you are ready to sell your business and retire is for the selling process to drag on forever.Read More
You should never forget that your partnership agreement is, in fact, one of the most important business documents you will ever sign. Many people go into business with loved ones, relatives or lifelong friends only to discover (once it’s too late) that they should have had a partnership agreement. A partnership agreement protects everyone involved and can help reduce problems that may arise. Outlining what will happen during different potential situations and events in a legal framework can help your business keep running smoothly.
What Should Be in a Partnership Agreement?
Every business is, of course, different; however, with that stated, any partnership should outline, with as much clarity as possible, the rights and responsibilities of all involved. A well written and carefully considered partnership agreement will keep small problems and disagreements from evolving into more elaborate and serious concerns.
There are times to take a DIY approach and then there are times when you should always opt for a professional. When it comes to partnership agreements, it is best to opt for working with a lawyer. Finding competent legal help for drafting your partnership agreement is simply a must.
What is Typically Addressed in a Partnership Agreement?
In theory, a partnership agreement can cover a wide-array of factors. Here are a few points typically addressed in partnership agreements.
What Questions Will a Good Partnership Agreement Address?
- Which partner(s) are to receive a draw?
- How is money to be distributed?
- Who is contributing funds to get the business operational?
- What percentage will each partner receive?
- Who will be in charge of managerial work?
- What must be done in order to bring in new partners?
- What happens in the event of the death of a partner?
- How are business decisions made? Are decisions made by a unanimous vote or a majority vote?
- If a conflict cannot be resolved when must the conflict be resolved in court?
Thanks to partnership agreements, all partners involved can proceed and start a new business with fewer areas of concern. The simple fact is that without a partnership agreement, your business can face a range of disruptions; these would be disruptions that could ultimately spell doom for your business.Read More
Are You Ready For Your Second Half? One of the greatest social developments of this century has been the extension of lifespan, especially of working lifespan. As a result, a growing number of people expect to find enjoyment in their work. Additionally, as they reach their mid-forties and beyond, the work they have known and loved during their First Half, may no longer be as challenging or hold the same allure as it once did.
A seed begins to grow – an increasing awareness that new stimulus and growth is needed. This is where we begin to take stock of our life and career as we move towards our next major life stage. As “Half Time” author Bob Buford says, “For the Second Half of life to be better than the first, you must make the choice to step outside of the safety of living on auto-pilot. You must wrestle with who you are, why you believe what you profess to believe about your life, and what you do to provide meaning and structure to your daily activities and relationships.”
According to an article that first appeared in Financial Executive Magazine, every day 10,000 Baby Boomers turn 65 and face the question of what to do after retirement. Some of them may be selling a family business or are laid off without much hope of obtaining a comparable job. Many, perhaps most of this group have no idea about what to do next – especially if they don’t want the second half of their lives to be characterized by decline, boredom and increasing ineffectiveness.
Most men and women in their 50s and 60s are immersed in their business or profession and have given little or no thought to the next phase of their life. Their First Half may have been too busy and they just never seemed to find the time to stop and reflect. Finding a new career, parallel career or new life mission means restructuring one’s life and that does require time and self-reflection. If you cannot afford to take the time and solitude necessary to discover your next great thing, then you are not ready to find it. Taking stock provides retiring Baby Boomers with a real opportunity to consciously shape their next major life stage – their Second Half.
What’s a good first step? Set aside some time to spend in solitude with a journal – preferably out in nature. As theologian and philosopher Soren Kierkegaard once said, “If I were a doctor and were asked for my advice, I should reply, Create silence.”
Here are some questions to ask yourself as you take stock of where you are at this moment:
- If my life was absolutely perfect, how would it look?
- What are the values that give purpose to my life?
- What are my passions?
- Am I missing anything in my life right now that’s important to me?
- What do I do so well that I would enjoy doing it without pay?
- What causes do I care about in the community? The world?
I partner with clients that are asking: What now? Where am I headed? What will bring more purpose and meaning to my life? After all, it is only after developing a complete perspective of where we’ve been, and where we stand now, that we can begin to move forward into a new vision for our life. Let me help you create a customized performance roadmap that will help you live out and create inspired impact!
Blog provided by Diane Sansom